Ever wonder why some outlets are so reluctant to accept American Express and Diners Club?

The reason, featured in a graph from the federal government’s financial system inquiry, is high merchant fees.

The fees applied to outlets for using American Express and Diners Club have fallen in the past decade but remain above the cost of accepting MasterCard and Visa, and well above the cost of eftpos.

The difference is partially due to regulations.

The Reserve Bank caps interchange fees, the charge paid between banks for a card-based transactions, but the rules differ by the payments system.

American Express and Diners Club are known as three-party payment systems, as the card companies take the role of issuer and acquirer, so there is no interchange fee to regulate.

MasterCard and Visa are known as four-party systems and their interchange fee is capped at either a weighted average of 12 cents per transaction or 0.5 per cent of the transaction value.

Eftpos is also a four-party system with the interchange fee is capped at the weighted average of 12 cents per transaction.

The Reserve Bank’s submission to the inquiry argues that interchange fee caps have reduced merchant service fees and added price pressure to American Express and Diners Club.

Submissions from MasterCard and Visa argue that interchange fee caps benefit merchants rather than cardholders.

“(MasterCard and Visa) contend that, although the caps may have reduced costs for merchants, they have also lowered the value to cardholders, limiting reward points and potentially making credit card fees and interest rates higher than they would have been,” according to the inquiry’s interim report.

It offers a range of policy options to consider, including lowering the interchange fee caps, expanding fee caps to other payment systems, removing the fee caps, capping merchant fees, or allowing merchants to chose the scheme to route transactions through once customers have selected credit or debit.